Value Proposition: Tiered Network Plan Design for Navigator by Tufts Health Plan

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1 Value Proposition: Tiered Network Plan Design for Navigator by Tufts Health Plan John D. Freedman, MD, MBA National Health Policy Forum July 28, 2005

2 Outline Objectives Understand market dynamics and rationale for tiering Review value purchasing as an approach to tiering Discuss the creation of the value-based metrics Describe process for collaboration with physicians and hospitals Agenda Market dynamics Navigator s design Value index based on quality and cost Metrics included in hospital value index Collaborative process Summary of lessons learned

3 Market Dynamics National Trends National Purchaser and Consumer Organization Vision High Impact on Americans Value of Health Benefits Performance Consumerism & Pay For Performance Care System Response Clinical re-engineering By MDs, hospitals Q 50 ppts $ 40 ppts Disclosure Performance Comparisons for hospitals, MDs & Tx Market sensitivity to performance Low 2002 Key Evolutionary Steps Mercer HR Consulting

4 Market Dynamics National Trends The Institute of Medicine Vision EMPLOYERS CARE SYSTEM OUTCOMES Supportive market environment Organizations that facilitate the work of patientcentered teams High performing patient centered teams Safe Effective Efficient Personalized Timely Equitable GOVT & PLANS CARE SYSTEM RE-ENGINEERING IMPERATIVES 2004 Mercer HR Consulting Redesigned care processes Effective use of information technologies Knowledge and skills management Development of effective teams Coordination of care across patient conditions, services, and settings over time Use of performance and outcome measurement for continuous quality improvement and accountability

5 THP Long-Term Vision & Strategy Decrease Medical Trend Improve Quality of Services Delivered Employee/Member Engagement Optimize Health Care Value Financial Plan Design Incentives Behavioral Incentives Information/Decision Support Provider Engagement & Accountability Tiering Based on Efficiency and Quality Pay for Performance Published Quality Metrics Transparency Improvements in Patient Safety

6 Client: The Commonwealth of Massachusetts Largest employer in MA - 270,000 beneficiaries THP s largest client 4+ years of double-digit premium increases

7 Benefit Design PPO Plan Phased-in metrics &/or tiering beginning 7/1/04 Hospitals 2004 PCPs 2005 Specialists 2006 Cost and quality measures Hospital measures in 3 clinical service areas Adult Med/Surg, Pediatrics, Obstetrics Variable member inpatient copayment Core medical management programs

8 Year Example 1: Fiscal of Hospital Year 2005 Index Year 1: Fiscal Year 2005 (7/1/04 Model 6/30/05) (7/1/04 6/30/05) Hospital Index (Inpatient) Quality Better Quality Good Cost Standard copay Good Quality Good Cost Highest copay Better Quality Better Cost Lowest copay Good Quality Better Cost Standard copay Cost

9 Year Example 1: Fiscal of Hospital Year 2005 Index Model (Inpatient) (7/1/04 6/30/05) Higher score Lowest Copay Quality Higher Quality/ Good Efficiency Standard Copay (Includes 50% of hospitals) (Includes 25% of hospitals) Higher Quality/ Higher Efficiency Highest Copay (Includes 25% of hospitals) Good Quality/ Higher Efficiency Lower scores Good Quality/ Good Efficiency Cost Efficiency Higher score

10 Hospital Cost & Quality Measures Cost Adjusted average cost per case: Contracted rates Average length of stay Service mix Case-mix and severity adjusted Quality Adjusted mortality rate Adjusted complications rate (AHRQ) NHVRI/JCAHO measures Leapfrog (CPOE and ICU Staffing) Volume Credentialing status

11 Eastern Pediatric Quality vs. Efficiency Community Hospitals Quality Efficiency

12 Navigator Launch Rapid development - December, 2003-March, 2004 Open Enrollment April-May, 2004 Go-live July 1, ,000 members Preliminary results are favorable

13 Refinements via collaboration Feedback on hospital inpatient metrics Extensive network involvement Network hospitals Expert Panel convened throughout summer, 2004 PCP ratings begun July, 2005 Network physician organizations meetings Expert Panel input Ratings based on cost and quality (HEDIS & patient satisfaction)

14 Summary 1. Important differences in cost and quality exist and must be addressed. Value-based tiering is one option. 2. The marketplace is moving. Larger plans, larger employers may be first, but CMS will have major impact, and others are already following 3. Success of tiered networks is dependent upon the value they deliver 4. Collaboration with network representatives helps ensure best metrics and methods used

15 Future directions 1. Transparency of data 2. Broad standards of measurement 3. Government support 4. Whither competition?